FYI: With new all-time highs for some of the largest US banks (JPM, WFC) and some investment banks (GS), we wanted to see if equity markets are saying the same thing as credit markets.
First, in the chart below, we compare the spread on US bank CDS for some of the largest US banks by market cap: Wells Fargo, JP Morgan, Bank of America, Citi, Morgan Stanley, and Goldman Sachs. The higher the CDS spread, the more expensive it becomes to insure bank debt against a default. While it can be challenging to directly imply a probability of default from CDS prices (because they’re also sensitive to recovery value), higher CDS spreads are indicative of the market pricing in stress for a given credit issuer.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/a-look-at-bank-cds/
